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IBM ramping up efforts to predict investor behavior, life events

Pairing technology with humans goes beyond asset management, by getting to know the client — and maybe even their future

Imagine an adviser coming into the office one morning. She turns on her computer and a dashboard is ready to provide her with tasks for the day ahead.

The computer tells her, based on the news and a client's recent emails, there is a significant chance he is going to pull his money out of the markets because he's nervous about the volatility, so she should probably discuss some alternative strategies with him. Meanwhile, the computer reasons a client couple is expecting their first child, based on their social media posts, so she might want to prepare some information on 529 college plans.

The concept may seem far-fetched, but financial planning technology that predicts future behaviors and anticipates life-planning events is already built for advisers.

Technology giant IBM has created Client Insights for Wealth Management, a dashboard where with some clicks, advisers at large institutions can log on to a program that pulls data from adviser software and cross-references that information with market data, news events and clients' social media accounts and other interests. Client Insights will then provide suggestions and a list of priorities for the adviser to consider.

Right now, IBM's offering is aimed mostly for larger institutions, but the company expects to reach registered investment advisers with its partners, said Rob Stanich, wealth management offering manager at IBM. When it does, advisers will no longer have to sift through their own client information searching for trends or insights into building better client relationships.

"We are going to shift those burdens onto the analytics," Mr. Stanich said during a visit at the IBM offices in downtown New York.

By the end of June, IBM plans to release its cloud offering along with additional features such as a wider range of life-event detection from social media accounts and emails along with client profiling — where "needs," "traits" and "values" are assigned to clients. It currently has a section for advisers to know more about clients' interests, such as their favorite sports team's big win the night before their meeting. The program also can serve as a prospecting tool, helping advisers find the right clients for their practices.

DBS Bank in Singapore currently uses IBM technology, which has freed up about 20-25% of a typical adviser's day so far, Mr. Stanich said.

Other features on the software's roadmap include gauging client sentiment from emails and social media — all done with permission, Mr. Stanich added. Eventually, IBM plans to expand the offering to analyze advisory firms, with an eye on predicting which advisers are preparing to leave the firm.

The culmination of these functions is cognitive computing: technology that does wide searches for data, identifies patterns and trends, and understands natural language — in other words, as if speaking to Apple's Siri or Microsoft's Cortana. But this software also has predictive analytics, to figure out “money in motion” moments, and machine learning, to constantly offer better advice through a computer. It incorporates technology by IBM Watson, the computer well known for winning a game of Jeopardy, which has also been making strides in the wealth management industry with an ecosystem of third-party vendors.

"This is the whole notion of a machine tapping you on a shoulder and telling you 'here is what you should consider,'" said Manoj Saxena, chairman of Cognitive Scale, a cognitive computing company.

IBM's platform does not make product recommendations, but will tell the adviser how it came to its conclusions or suggestions. "It's important to give advisers reasonings because otherwise, they won't do it," Mr. Stanich said.

There are other companies in the industry pointing toward artificial intelligence.

Wealthfront, one of the original direct-to-consumer robo-advisers, touched on artificial intelligence in their newest version of their asset allocation offering. It will act on information from client accounts as well as the data coming from other financial services accounts, such as checking and savings accounts, and apps, such as Venmo and Lending Club. Vestorly, a content management provider for advisers, started the year with news on artificial intelligence.

Adam Nash, chief executive of the company, said in a company blog post that Wealthfront believes more of this technology will take over the financial services industry in the next decade.

"The entire fabric of the financial system will be rethought, redefined and rewired," Mr. Nash said. "One thing is certain. Artificial intelligence is the only way to bring high quality and low cost financial advice to the millions and millions of people who don't meet the high minimums of the traditional industry."

Dedham, Mass.-based data analytics company Rage Frameworks is also working on cognitive computing for the financial services industry, just not for small RIAs yet. Deloitte uses it to analyze companies and their financials.

"It is richer advice at a lower cost … the other benefit is it really frees up the high-end analyst's time, so they can devote more time spending with clients," said Venkat Srinivasan, chief executive of Rage Frameworks. "The really good advisers will stand out because there will be a lot more transparency."

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